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Analysts Battle Over Gap's March Results

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On Thursday, The Gap (NYSE: GPS) reported March sales results. Shares traded about two percent lower following weak results and lower-than-expected decline in comps.

Summary of Results

  • The company expected March to be negatively impacted due to the Easter holiday being in April this year versus March last year.
  • Net sales for the five-week period ended April 5, 2014 were $1.51 billion. Same-store sales were down six percent versus a one percent drop last year.
  • Gap Global brands came in at negative seven percent versus flat last year. Banana Republic Global sales were negative four percent versus positive one percent last year. Old Navy sales were down seven percent versus negative two percent last year.
  • The Gap reaffirmed previous full-year earnings per share guidance range of $2.90 to $2.95 for fiscal year 2014.

Analysts Battle Over Company's Results

  • Topeka Capital Markets analyst Dorothy Lakner reiterated a Buy rating on Gap. Lakner noted the company's reaffirmed outlook with improved traffic from warmer weather, lean inventories and 2H benefits from supply chain efforts. Topeka added that Gap's analyst day next week is a positive catalyst. The analyst holds a $53.00 price target on Gap shares.
  • Mizuho analyst Betty Chen reported that the recent pullback on March comp miss provides an attractive entry-point for investors "given GPS' flexible operating model and solid expense control which allowed management to reaffirm FY14 guidance." Chen added that Gap is "compelling" for long-term investors due to the company's international growth potential and emerging brands, including Athleta.
  • Analyst Lorraine Hutchinson from Bank of America Merrill Lynch maintained a Neutral rating on Gap and lowered the price objective from $45.00 to $43.00. The analyst reduced estimates and the price objective to reflect comp miss, gross margin pressure, and higher SG&A costs. Hutchinson commented, "We continue to view Gap's consistent earnings growth favorably; however, we see less upside ahead as comps remain muted and gross margins are under pressure."

Shares of Gap closed at $39.29 on Thursday and are currently trading at $38.47, down 2.13 percent.

Posted-In: Bank of America Merrill Lynch Betty Chen Dorothy Lakner Lorraine HutchinsonAnalyst Color News Retail Sales Events


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